Amazon.com, Inc. (AMZN) Yields 42% YTD; Analysts Bullish

Amazon.com, Inc. (NASDAQ:AMZN) is not scheduled to report second quarter earnings until later this month, but that has not stopped analysts from voicing bullish sentiments on the stock. The now 20-year old company’s shares last traded hands near its 52-week high of $452.65. Underlying macro trends along with strong company fundamentals have helped boost the stock price up 42% year-to-date.

In 2006, the e-commerce giant launched Amazon Web Services (AWS) to provide online services for other websites or client-side applications. Essentially, AWS is a collection of remote computing services that make up a cloud-computing platform offered by Amazon. In April 2015, AWS became profitable with sales of $1.57 billion in the first quarter of the year.

At the most recent AWS summit in New York City on July 9, Amazon CTO Werner Vogels detailed key trends he sees in the cloud and announced new services to help meet the demands of those trends. Furthermore, Vogel stressed that AWS is leading the cloud service provider with more than 1 million users and will continue to pile on new features and services for its enterprise customers.

At the summit, Amazon announced AWS Device Farm, a new service that helps mobile app developers quickly and securely test their apps on smartphones, tablets, and other devices to improve the quality of their Android and Fire OS apps. Once the tests are complete, developers receive timely reports that identify problems, helping them bring their apps to the market faster and with a higher quality.

Merrill Lynch analyst Justin Post tagged a huge valuation on Amazon following the NYC summit. On July 10, Post reiterated a Buy rating with a $475 price target. Specifically, the analyst valued the company at 5.5x expected 2016 revenues. Post then gave Amazon a price-to-sales value of .94x, putting the overall valuation of Amazon at $475.

The analyst supports his bullish rating by referring to Amazon’s ability to exercise pricing power. In his report, Post commented that “Amazon de-emphasized pricing at [the summit] and did not highlight all the historical price cuts.” Pricing power will allow Amazon to raise prices without losing business to its competitor, locking in stable demand and thus stable revenues and profits.

Looking ahead to the company’s July 23 earnings report, the analyst expects Q2 AWS revenue growth of 60%. He adds that there could even be “upside potential” to that number.

In regards to Macro trends, Post is bullish on the cloud computing market. Specifically, the analyst said that cloud computing enables mobile infrastructure, a trend that he finds the “most interesting.” Post added, “We also see predictive data utilization as one of the most important characteristics of successful Internet companies.”

When measured over a one-year horizon and no benchmark, Justin Post has an overall success rate of 68% recommending stocks, earning a +18.6% average return per recommendation. The analyst has rated Amazon a total of 18 times since September 2009 earning a 67% success rate recommending the stock and a +15.1% average return per Amazon recommendation.

The retail giant is also around the corner from celebrating its 20th anniversary. Amazon says it will mark the anniversary by holding Prime Day: a super-sized summer savings day, promising more savings than those offered on Black Friday. The name of the event comes from “Amazon Prime,” its $99-a-year program that gives customers free two-day shipping and free access to streaming movies and TV shows. The savings will start at 12a.m. on July 15, with new discounts launching every ten minutes. Amazon’s CEO Jeff Bezos hopes the event will get more people to sign up for Prime, since only prime customers can get the savings.

On July 10, Cantor Fitzgerald analyst Youssef Squali reiterated a Buy rating on the stock with a $460 price target.

Squali “view[s] Prime Day positively for AMZN’s top line growth as well as a potential driver for growth in Prime memberships.” He views the Prime Day promotion as somewhat similar to Alibaba’s Singles Day event in China, which has become one of the heaviest days for online shopping on Alibaba’s platform.

When measured over a one-year horizon and no benchmark, Youssef Squali has an overall success rate of 65% recommending stocks, earning a +21.4% average return per recommendation. The analyst has rated Amazon a total of 24 times since January 2009 earning a 83% success rate recommending the stock and a +17.4% average return per Amazon recommendation.

Shares of Amazon last closed at $434.39 on July 10.

Out of 31 analysts polled by TipRanks, 21 analysts are bullish on Amazon and 10 are neutral. The average 12-month price target for Amazon is $474.19, marking a 6.92% potential upside from where stock is currently trading. On average, the all-analyst consensus for Amazon is Moderate Buy.

Cody Miecnikowski writes about stock market news. He can be reached at cody@tipranks.com